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Asda to cut 1,360 jobs Asda to cut 1,360 jobs
(about 9 hours later)
The supermarkets group Asda is axing 1,360 jobs as it "radically" restructures the management of its stores in the face of the rapid shift towards buying groceries online. Asda is cutting 1,360 middle managers, redeploying staff into fast-growing online shopping jobs as it attempts to take out £1bn in costs over the next five years.
The company said 4,100 staff would be affected by the re-jig which will also create 5,670 new roles, many of which are linked to e-commerce and grocery home shopping. A statement said the new structure also put more staff on the shop floor and removes back-office administration tasks. The Walmart-owned company said 4,100 staff were affected by the restructuring, which creates 5,670 new roles, many of them lower-paid, linked to the faster-growing home-shopping business.
Asda chief executive, Andy Clarke, said: "Every supermarket must adapt to the intense changes in UK retailing or they will get left behind." The supermarket said the staffing shakeup was in response to "intense structural changes" in the grocery market. The big four supermarkets are all seeking to cut costs as the era of big box retail comes to an end. On the one hand they are being forced to cut prices to compete with the fast-growing food discounters Aldi and Lidl, but they also need to invest in new sales channels such as the internet and home grocery deliveries.
The restructure was first announced in May when Asda said as many as 2,600 staff could lose their jobs. It comes as Asda attempts to find £1bn in cost savings over the next five years. All the major supermarkets are cutting costs as they are forced to lower prices to compete with the rise of discounters such as Aldi and Lidl, while also investing in the rapid growth of online grocery shopping. "As much as it is my job, and privilege, to be chief executive of this business and to do what is right for Asda as a whole, this is one of the most difficult decisions I've had to make," said its chief executive, Andy Clarke. "Whilst I genuinely believe that it is the right decision for the future of Asda, knowing that it will result in valued colleagues leaving us is not easy. Every supermarket must adapt to the intense changes in UK retailing or they will get left behind."
The job cuts come months after Asda was praised by the prime minister, David Cameron, for its plans to create 12,000 new jobs over the next five years as it opened new stores. At that time, Doug McMillon, president and chief executive of Walmart, said the company was "creating more new jobs and bringing real value to more customers in the UK".
The shakeup was first announced in May, when Asda said as many as 2,600 staff could go. Staff canteens are also being closed – replaced with vending machines. Asda's chief operating officer, Mark Ibbotson, who is leading the cost-reduction project, said: "We believe we are about 18 months ahead of our competitors. They're all going to have to do this."
In June Morrisons also announced it was consulting staff about store management changes that could lead to as many as 2,600 job losses.
Asda said the changes created "more flexible store management structures to satisfy the constantly evolving shopping habits of supermarket customers today and in the future". The company said the new structure put a greater emphasis on e-commerce and removed back-office administration tasks. Over the coming weeks managers affected by the changes will either begin training for their new jobs or take a redundancy package, it said.
Before the recession the discounters were dismissed as a sideshow in UK food retail, but their rapid growth means that, taken together, Aldi and Lidl are now a bigger force than the Co-op, the country's fifth-largest supermarket chain. Some analysts believe they are a bigger strategic threat to the big supermarkets than the internet. Last month, Sainsbury's announced a joint venture with Denmark's biggest retailer, Dansk Supermarked, to relaunch the Netto discount brand in Britain, with 15 stores expected to open by the end of 2015.
Shore Capital analyst Clive Black said supermarket bosses were being forced to tackle their labour costs as it is the only lever they can pull in a market where there is weak demand and intense price competition. "It is our central expectation that more jobs will go at the big supermarkets, with major initiatives expected to come with respect to head-office headcount across the industry," he said.
After keeping a tight hold of the purse strings during the recession, Britons now buy less to avoid wasting food and make more frequent top-up shops at small stores as opposed to doing one large weekly shop.
These changes put pressure on the economics of big box stores, which have high fixed costs. "We believe that Sainsbury's and Tesco will also announce in due course material productivity programmes involving labour shedding," adds Black in a note.